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Technical Efficiency of the Brazilian Municipalities: Correcting Nonparametric Frontier Measurements for Outliers

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Abstract

In this paper we estimate the DEA technical efficiency for 4796 Brazilian municipalities, by applying a recently proposed “Jackstrap” method, which combines Bootstrap and Jackknife resampling techniques, to reduce the effect of outliers and possible errors in the data set. We perform calculations to identify and eliminate high leverage municipalities, using different variants of Data Envelopment Analysis (DEA), as well as Free Disposal Hull (FDH). Corroborating previous results, efficiency results for the Brazilian municipalities show a clear relationship between the size of the municipality and its efficiency scores. Indeed, under both DEA variants, smaller cities tend to be less efficient than larger ones hence indicating that the quality of the frontier adjustment improves significantly as the size of the municipality increases. We present arguments that may explain to some extent these findings, such as economies of scale and the excess spending due to revenue from royalties. However, such effects require further, more careful examination.

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Authors and Affiliations

  1. Departamento de Economia, Instituto Central de Ciências - Ala Norte, Universidade de Brasília, Campus Universitário Darcy Ribeiro, CEP: 70910-900, Brasília, DF, Brasil

    Maria Da Conceição Sampaio De Sousa

  2. Departamento de Física e Matemática, Universidade Federal Rural de Pernambuco, Rua Dom Manoel de Medeiros s/n, Dois Irmãos, 52171-900, Recife, PE, Brasil

    Borko Stošić

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  1. Maria Da Conceição Sampaio De Sousa
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  2. Borko Stošić
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Correspondence to Maria Da Conceição Sampaio De Sousa.

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Sousa, M.D.C.S.D., Stošić, B. Technical Efficiency of the Brazilian Municipalities: Correcting Nonparametric Frontier Measurements for Outliers. J Prod Anal 24, 157–181 (2005). https://doi.org/10.1007/s11123-005-4702-4

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